Question

Assume Smart Touch Learning had 5 tablets in its beginning inventory, each with a cost of 230. On January 3, Smart Touch Learning purchased 6 tablets at a cost of 330 each. On January 10, Smart Touch learning sold 5 tablets to a customer. If the company is using the LIFO method, what is its ending inventory balance on January 10?

Answer 1

According to the LIFO method, the ending inventory balance on January 10 is 6 tablets.

Step-by-step explanation:

The company is using the LIFO method, which stands for Last In, First Out. According to this method, the cost of the most recently purchased inventory is assigned to the items sold first. Using the LIFO method, the ending inventory balance on January 10 can be calculated as follows:

1. Starting inventory: 5 tablets at a cost of $230 each, totaling $1150.
2. Purchase on January 3: 6 tablets at a cost of $330 each, totaling $1980.
3. Sold on January 10: 5 tablets.

Since the most recent purchase is valued higher at $330, the cost of the 5 tablets sold is $1650 (5 tablets * $330 each). Therefore, the ending inventory balance on January 10 is the remaining tablets from the starting inventory and the January 3 purchase, which is 6 tablets (11 tablets - 5 tablets sold).

Ending inventory balance on January 10: 6 tablets